Man Utd Dual Class Shares IPO Criticized

Michael Mackenzie and Ajay Makan, Financial Times

Thursday, 9 Aug 2012 | 2:06 AM ETFinancial Times

SHARES

The initial public offering of Manchester United is on track to be finalized by Thursday evening in spite of some criticism over how one of the world’s most supported football clubs is going public, according to people close to the deal.

Ian Walton | Getty Images

Manchester United IPO

The English club, bought by the Glazer family in 2005 for £790 million ($1.237 billion), is offering 16.7 million class A shares that are set to price Thursday at between $16 and $20 each, before listing on the New York Stock Exchange on Friday.

“Institutional investors have shown strong interest. The ratio of conversion from attendance at roadshow events to firm indications of interest has been better than usual,” he added.

At the high end of its price range, the IPO will raise $330 million and value the club at $3.3 billion. At $18 per share, Man Utd would have a market capitalization of $2.95 billion with an enterprise value including debt of $3.38 billion, according to Morningstar, the data provider.

Morningstar said that the pricing would be above its fair value of about $10 a share.

“However, shares could trade at a significant premium to our fair value estimate if the market values the soccer team in line with other successful sports franchises,” its analysts said.

The Glazer family have had to scale back their capital raising target to about $300 million from $1 billion after efforts in the past year to sell shares on exchanges in Hong Kong and then Singapore failed to garner sufficient demand.

Some institutional investors have questioned the dual class voting structure that will see the Glazer family retain control through shares that have 10 times more voting power than publicly traded shares.

Under the terms of the sale, by which they are selling one-tenth of the club to the public, the Glazer family will keep the proceeds from the sale of 8.33 million shares with the rest being used to pay down existing debt, last reported at £423 million.

A successful IPO will result in investors owning 42 per cent of the club’s A shares but only carrying voting rights of 1.3 per cent.

Leon Kamhi, executive director at Hermes Equity Ownership Services, said IPOs of companies with dual voting structures were “clearly not aligned to the interests of outside shareholders”.

“The public markets are being taken for a ride,” he added.

The offering was also boosted last week when the club unveiled a record-breaking $559m sponsorship deal over seven years with General Motors , which will see the carmaker’s Chevrolet branding placed on Man Utd shirts.

As well as pocketing the Glazer family about $140m, a successful listing for the club would be a coup for Jefferies, the New York investment bank that is leading the offering.